LEND OF AN ERA

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THE credit squeeze is beginning to bite at last as demand for mortgages and car loans dropped by 15 per cent last month.

In the wake of five recent rate rises by the Bank of England, mortgage lending totalled #15.1billion last month - which was #1.2billion lower than September and 15 per cent down on a year ago.

Significantly, this is the second successive year-on-year fall recorded.

The total number of loans approved slumped by a third to just over 181,000.

The figures would have been even lower but for a 39 per cent increase in remortgaging by borrowers trying to avoid the interest rate hike by finding a cheaper deal.

The figures, from the British Bankers' Association, also show slower growth in personal loans and credit cards, reflecting the slowdown in high street spending last month. Borrowing on credit cards totalled #7,173 million in October - its lowest since February and 8.6 per cent down on the average of the previous six months.

David Dooks, director of statistics at the British Bankers' Association, said: "The weakening demand for both mortgage lending and consumer credit seen over the last few months continued in October and weak approvals data suggest that this pattern will be maintained in the short term.

"With mortgage lending volumes slowing, it is not surprising that competition among lenders is intensifying and, at the same time, borrowers are looking to reduce their borrowing costs."

There was also a big drop in the number of cars bought with credit last month.

The number of new cars bought on tick fell by 14 per cent to 83,691 and second-hand motors by 15 per cent to 60,940.